The Inflation Reduction Act is already advancing carbon capture

Two carbon-capture projects are moving ahead, thanks to US tax-credit enhancements in the recently passed Inflation Reduction Act (IRA). One is a direct-air capture (DAC) plant that the start-up CarbonCapture plans to build in Wyoming; the other is an ammonia plant the fertilizer producer OCI has slated for Texas.

OCI Executive Chair Nassef Sawiris cited the new law in a statement about the company’s plans. “The recent passage of the IRA, which bolsters the regulatory framework and competitiveness of clean ammonia in the US, in addition to technological developments in carbon sequestration, is supporting ammonia as a key driver of the energy transition,” he said.

The plant, in Beaumont, Texas, will use a process from the industrial technology firm KBR. It will produce hydrogen from natural gas, capture the resulting CO₂, then react the hydrogen with nitrogen to produce ammonia at a scale of 1.1 million metric tons (t) per year starting as early as 2025.

The IRA makes several adjustments to a provision in the US tax code called 45Q, which offers tax credits for CO₂ capture, utilization, and storage. In addition to boosting the value of the credits, the law makes many projects eligible for direct pay. Before, companies could only deduct the credits from taxes they owe.

“What direct pay does is it turns tax credits into cash,” explains Matt Lucas, a cleantech expert at New Energy Risk, a project finance consulting firm.

The law also reduces the minimum capture volume needed to claim 45Q credits. That provision is especially important for CarbonClean’s modular DAC technology, the firm’s vice president for business development, Patricia Loria, said at a recent event held by the nonprofit Carbon Capture Coalition. “We’re going to grow in a modular, sustained way. And so that allows us to get those kinds of funding support right from the start,” she said.

CarbonCapture announced last October that it had raised $35 million in series A funding from investors including the mining and metals company Rio Tinto. The company says its modular units are designed to be the first to use zeolites for capturing CO₂.

The firm says the Wyoming plant, named Bison, will begin capturing CO₂ in 2023 and ramp up to 5 million t of CO₂ per year by 2030. Along with direct pay, Loria said, “This is making new business models look immediately more attractive.”

Lucas cautions that the announced timelines are optimistic, citing what he calls the first law of start-ups: “Press releases almost always precede real financial or construction activity.” However, despite some false starts, steel is going into the ground for carbon capture, he says. Red Trail Energy has begun injecting CO₂ into the ground from ethanol production in North Dakota, for example. Similarly, Climeworks’s DAC plant in Iceland is running, and the firm has broken ground on the next one.

45Q and other regulatory support are allowing carbon-capture and DAC firms to do something unusual and remarkable, Lucas says: build major infrastructure projects as start-ups using money from pension funds and other investors. “It’s going to be a real disruptor to traditional oil and gas and chemical companies because now you don’t have to have a huge balance sheet,” he says. “I love this; I think it’s the way of the future.”